A Beginner's Guide To Spot Pricing

Published:12/04/2018

If you are in the beginning stages of owning precious metals, you may have wondered a time or two what “spot” pricing was and where it comes from. As confusing as it may seem, the process behind it may be more simple than you think.

What Is A "Spot" Price?

A “spot” price or “premium” is, simply put, the going rate of all precious metals including silver, gold, platinum, etc. It is a price dictated by the current market and changes every few seconds. It is a right now price and no past or future prices affect the price at which that commodity sells for at that moment. The thing to remember when spot prices change, the higher the demand, the higher the price.

How Is Pricing Above Spot Determined?

Every dealer is different and with precious metals, margins are already tight. In order for retailers to make anything off precious metal purchases from their customers, they must factor in their costs and determine a selling price where the customer is still willing to buy. This makes the market competitive because as a customer, you ultimately get to choose where you purchase precious metals from.

For example, say that current silver spot pricing is $14.16 per ounce. Depending on your dealer, their cost might be slightly higher than the spot price which in turn causes them to charge upwards of $3.00+ in order to make anything off the silver purchase. That is a strict one ounce/one piece basis which leads to the bigger picture: bulk pricing.

As any retailer advertises, the more you buy, the more you save. In this case, the same spot price of $14.16 per ounce of silver will have a much better over spot price if you bought upwards of 500 pieces or more. In this case, a dealer may only charge you $0.89 over spot and make less than if a consumer were to purchase just one piece and charged $3.00+ to cover costs including shipping.

United States Mint Above Spot Pricing (Bullion)

For many precious metals collectors, silver American Eagles and gold American Eagles are the bullion they choose to collect. The history behind each program is quite rich and the collectibility is rather high. With this information comes a caveat of sorts: US Mint issued silver comes at higher premiums simply for the fact they were produced by and are shipped from the United States Mint.

This is a trickle effect for dealers. The mint charges more for their product which then causes dealers to raise their silver bullion prices for their customers. There is a slightly higher fee even though the silver and/or gold content is the same as other silver and gold minted product available to you from many other mints. This is because a silver American Eagle is an actual coin with face value that is backed by the United States government. Regardless of market changes, a silver eagle will always be worth a dollar face value.

SilverTowne Pricing (Bullion)

Like many other dealers and retail shops, we determine our precious metal pricing based on the same factors mentioned above. However, we are unique in that we produce bullion at our own SilverTowne Mint. All SilverTowne Minted bullion is backed by a guarantee of weight and purity.

A competitive market drives the prices above spot and will always continue to do so. SilverTowne’s advantage in this area is that we have our own product that is designed, produced, and sold by us. All of our core bullion ships free which encourages consumers to purchase as much as they want (or as little) while not having an additional fee. Our involvement in every aspect of the silver that leaves our building is second to none. A top-down approach allows us to give our customers the full and absolute benefits of owning silver all the while giving you the best prices and opportunities to continue doing so in the future.

Although the thought of market prices and precious metals as a business might seem daunting to a collector just dipping their toes into the water, spot pricing and precious metal bullion should never be a scary subject to any novice looking to gain information about the process.

Here at SilverTowne, employees and customers alike continue to learn more and more about the ins and outs of the business every day. There are no silly questions simply due to the fact that it is a fast-paced business that changes in seconds! Literally! SilverTowne welcomes your questions and is willing to aid in your quest to move from novice to expert in no time!